Operational risks that may contribute to lower output or higher costs of coal production

The Group’s coal production volume is subject to operational determinants and events beyond its control, which may disrupt its operations and affect the production volumes in the various mines in different periods.

The Group’s mining activity is above all subject to the influence exerted by mining determinants, which include among others:

- difficult geological conditions such as disruptions to the continuity of deposits characterized by volatility and irregularity that may curtail the effectiveness of mining longwall parcels to a greater extent than anticipated;
- level of natural hazards higher than forecast which may lessen the ability to mine individual longwalls;
- mine accidents, fires, explosions and methane combustion, coal dust explosions, methane and rock outbursts and rock falls and collapses;
- failures of machinery and equipment used in mining and processing.

Even though the Group has taken a multitude of measures to enhance safety these risks may grow in particular in conjunction with mining at deeper levels in the Group’s mines.

Moreover, the events and determinants that may affect production volume and in particular cost growth should include changes to the legal regulations concerning the coal industry.

A new geology and mining law is in force as of 1 January 2012. At present, work is in progress on the executive regulations to this law. The regulations governing coal mining in the face of natural hazards are expected to become more stringent. In truth, the Group undertook advance measures to make it possible to achieve the assumed level of output but it will be difficult to assess their impact on the Group’s mines’ production capacities and mining costs until the final wording of the regulations is published.